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OF  CALIFORNIA 

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TREASURY  DEPARTMENT 

UNITED  STATES  INTERNAL  REVENUE 


REGULATIONS  No.  38 


LAW  AND  REGULATIONS 


RELATIVE  TO 


THE  SPECIAL  EXCISE  TAX  ON 
CORPORATIONS  ORGANIZED  IN 
THE  UNITED  STATES  AND  ON 
CAPITAL  INVESTED  IN  THE 
UNITED  STATES  BY  FOREIGN 
CORPORATIONS 

Imposed  by  Section  407,  Title  IV 
Act  of  September  8,  1916 


OCTOBER  19.   1916 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1916 


s 

50 


> 


REGUATIONS  NO.  38,  RELATIVE  TO  THE  SPECIAL  EXCISE  TAX  ON 
CORPORATIONS,  ETC.,  UNDER  ACT  OF  SEPTEMBER  8,  1916. 

Treasury  Department, 
Office  of  Commissioner  of  Internal  Revenue, 

Washington,  D.  C,  October  19,  1916. 

CAPITAL-STOCK  TAX  LAW. 

(Sections  407,  408,  and  409,  Title  IV,  act  of  September  8,  1916.) 
SPECIAL  TAXES. 

Section  407.  That  on  and  after  January  first,  nineteen  hundred  and  seventeen, 
special  taxes  shall  be,  and  hereby  are,  imposed  annually,  as  follows,  that  is  to 
say: 

Every  corporation,  joint-stock*  company  or  association,  now  or  hereafter 
organized  in  the  United  States  for  profit  and  having  a  capital  stock  represented 
by  shares,  and  every  insurance  company,  now  or  hereafter  organized  under 
the  laws  of  the  United  States,  or  any  State  or  Territory  of  the  United  States, 
shall  pay  annually  a  special  excise  tax  with  respect  to  the  carrying  on  or  doing 
business  by  such  corporation,  joint-stock  company  or  association,  or  insurance 
company,  equivalent  to  50  cents  for  each  $1,000  of  the  fair  value  of  its  capital 
stock  and  in  estimating  the  value  of  capital  stock  the  surplus  and  imdivided 
profits  shall  be  included :  Provided,  That  in  the  case  of  insurance  companies 
such  deposits  and  reserve  funds  as  they  are  required  by  law  or  contract  to  main- 
tain or  hold  for  the  protection  of  or  payment  to  or  apportionment  a'mong  policy- 
holders shall  not  be  included.  The  amount  of  such  annual  tax  shall  in  all  cases 
be  computed  on  the  basis  of  the  fair  average  value  of  tlie  capital  stock  for  the 
preceding  year:  Provided,  That  for  the  purpose  of  this  tax  an  exemption  of 
$99,000  shall  be  allowed  from  the  capital  stock  as  defined  in  this  paragraph  of 
each  corporation,  joint-stock  company  or  association,  or  insurance  company : 
Provided  further.  That  a  corporation,  joint-stock  company  or  association,  or 
insurance  company,  actually  paying  the  tax  imposed  by  section  three  hundred 
and  one  of  Title  III  of  this  act  shall  be  entitled  to  a  credit  as  against  the  tax 
imposed  by  this  paragraph  equal  to  the  amount  of  the  tax  so  actually  paid : 
And  provided  further.  That  this  tax  shall  not  be  imposed  upon  any  corporation, 
joint-stock  company  or  association,  or  insurance  company  not  engaged  in  busi- 
ness during  the  preceding  taxable  year,  or  which  is  exempt  under  the  provisions 
of  section  eleven,  Title  I,  of  this  act. 

Every  corporation,  joint-stock  company  or  assocation,  or  insurance  company, 
now  or  hereafter  organized  for  profit  under  the  laws  of  any  foreign  country  ai;d 
engaged  in  business  in  the  United  States  shall  pay  annually  a  special  excise 
tax  with  respect  to  the  carrying  on  or  doing  business  in  the  United  States  by 
such  corporation,  joint-stock  company  or  association,  or  insur;ince  company, 
equivalent  to  50  cents  for  each  $1,000  of  the  capital  actually  invested  in  the 
transaction  of  its  business  in  the  United  States:  Provided,  That  in  the  crse 
of  insurance  companies  such  deposits  or  reserve  funds  as  they  are  required  by 
law  or  contract  to  maintain  or  hold  in  the  United  States  for  the  protection  of 
or  payment  to  or  apportionment  among  policyholders,  shall  not  be  included.  The 
67599'-19  (3) 


amount  of  such  annual  tax  shall  in  all  cases  be  computed  on  the  basis  of  the 
average  amount  of  capital  so  invested  during  the  preceding  year :  Provided, 
That  lor  the  purpose  of  this  tax  an  exemption  froni  the  amount  of  capital  so 
invested  shall  ))e  allowed  equal  to  such  proportion  of  $99,000  as  the  amount  so 
invested  bears  to  the  total  amount  invested  in  the  transaction  of  business  iu 
the  United  States  or  elsewhere :  Provided,  further,  That  this  exemption  shall 
be  allowed  only  if  such  corporation,  joint-stock  company  or  association,  or  in- 
surance company  makes  return  to  the  Commissioner  of  Internal  Revenue,  under 
regulations  proscribed  by  him,  with  the  approval  of  the  Secretary  of  the  Treas- 
ury, of  the  amount  of  capital  invested  in  the  transaction  of  business  outside  the 
United  States :  And  provided  fttrthcr,  That  a  corporation,  joint-stock  company 
or  association,  or  insurance  company  actually  paying  the  tax  imposed  by  sec- 
tion three  hundred  and  one  of  Title  III  of  this  act,  shall  be  entitled  to  a  credit 
as  against  the  tax  imposed  by  this  paragraph  equal  to  the  amount  of  the  tax  so 
actually  paid :  And  provided  further,  That  this  tax  shall  not  be  imposed  iipon 
any  corporation,  joint-stock  company  or  association,  or  insurance  company  not 
engaged  in  business  during  the  preceding  taxable  year,  or  which  is  exempt  under 
the  provisions  of  section  eleven,  Title  I,  of  this  act. 

Sec.  40S.  (Last  paragraph.)  Every  person  who  carries  on  any  ijusiness  or 
occupation  for  which  .special  taxes  are  imposed  by  this  title,  without  having 
paid  the  .special  lax  therein  provided,  shall,  besides  being  liable  to  the  puyraent 
of  such  special  tax,  be  deemed  guilty  of  a  misdemeanor,  and  upon  conviction 
thereof  shall  pay  a  fine  of  not  more  than  $500,  or  be  imprisoned  not  more 
than  six  months,  or  both,  in  the  discretion  of  the  court. 

Sec.  409.  That  all  administrative  or  special  provisions  of  law,  including  the 
law  relating  to  the  assessment  of  taxes,  so  far  as  applicable,  are  hereby  extended 
to  and  made  a  part  of  this  title,  and  every  person,  firm,  company,  corporation, 
or  association  liable  to  any  tax  imposed  by  tliis  title,  shall  keep  such  records 
and  render,  under  oath,  such  statements  and  returns,  and  shall  comply  with 
such  regulations  as  the  Commissioner  of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  may  from  time  to  time  prescribe. 


REGULATIONS. 

Concerning  the  Special  Excise  Tax  Imposed  by  Section  407,  Title  IV,  Act  of 
September  8,  1916,  on  Corporations,  Joint-stock  Companies  or  Associa- 
tions, and  Insurance  Companies,  Organized  for  Profit  in  the  United 
States,  and  on  the  Capital  Invested  in  the  United  States  of  Foreign  Com- 
panies and  Associations  Transacting  Business  in  the  United  States. 

RETURNS,  COMPUTATION  OF  TAX,   COLLECTIONS,  AND  PENALTIES. 

Tax  imposed. 

Article  1.  Section  407  imposes  a  special  excise  tax  with  respect  to 
the  carrying  on  or  doing  business  by  corporations,  joint-stock  com- 
panies or  associations,  or  insurance  companies,  as  follows: 

Corporations  in  the  United  States. 

{a)  Every  corporation,  joint-stock  company  or  association,  or  in- 
surance company,  now  or  hereafter  organized  in  the  United  States 
for  profit  and  having  a  capital  stock  represented  by  shares,  50  cents 
for  each  $1,000  of  the  fair  value  of  the  capital  stock  in  excess  of 
$99,000,  except  as  hereinafter  indicated ;  and 

Foreign  corporations. 

{h)  Every  corporation,  joint-stock  company  or  association,  or  in- 
surance company,  now  or  hereafter  organized  for  profit  under  the 
laws  of  any  foreign  country  and  engaged  in  business  in  the  United 
States,  50  cents  for  each  $1,000  of  the  capital  actually  invested  in  the 
transaction  of  its  business  in  the  United  States.  It  is  provided  in 
cases  in  which  the  foreign  corporation  makes  a  return  of  the  total 
amount  of  capital  invested  in  the  transaction  of  business,  both  abroad 
and  in  this  country,  that  such  proportion  of  $99,000  as  the  amount 
invested  in  the  United  States  bears  to  the  total  amount  invested  in 
the  United  States  and  elsewhere  may  be  remitted  in  computing  the 
tax  upon  the  capital  invested  in  the  United  States. 

Corporations  exempt. 

Corporations  and  associations  exempt. 

Art.  2.  {a)  The  following  corporations,  joint-stock  companies  or 
associations,  or  insurance  companies,  which  are  exempt  from  income 
tax  under  the  provisions  of  section  11,  Title  I,  are  also  specifically 
exempt  from  the  capital-stock  tax  under  section  407,  Title  IV,  of 
this  act : 

First.  Labor,  agricultural,  or  horticultural  organization ; 

Second.  Mutual  savings  bank  not  having  a  capital  stock  represented  by  shares ; 

Third.  Fraternal  beneficiary  society,  order,  or  association,  operating  under 
the  lodge  system  or  for  the  exclusive  benefit  of  the  members  of  a  fraternity  itself 

(5) 


operating  iindor  the  lodge  system,  and  providing  for  the  payment  of  life,  sick, 
accident,  or  other  benefits  to  the  members  of  such  society,  order,  or  association, 
or  their  dependents ; 

Fourth.  Domestic  building  and  loan  association  and  cooperative  banks  with- 
out capital  stock  organized  and  operated  for  mutual  purposes  and  without  profit ; 

Fifth.  Cemetery  company  owned  and  operated  exclusively  for  the  benefit  of  its 
members ; 

Sixth.  Corporation  or  association  organized  and  operated  exclusively  for  reli- 
gious, charitable,  scientific,  or  educational  purposes,  no  part  of  the  net  income 
of  which  inures  to  the  benefit  of  any  private  stockholder  or  individual ; 

Seventh.  Business  league,  chamber  of  commerce,  or  board  of  trade,  not 
organized  for  profit  and  no  part  of  the  net  income  of  which  inures  to  the  benefit 
of  any  private  stockholder  or  individual ; 

Eighth.  Civic  league  or  organization  not  organized  for  profit  but  operated 
exclusively  for  the  promotion  of  social  welfare ; 

Ninth.  Club  organized  and  operated  exclusively  for  pleasure,  recreation,  and 
other  nonprofitable  purposes,  no  part  of  the  net  income  of  which  inures  to  the 
benefit  of  any  private  stockholder  or  member ; 

Tenth.  Farmers'  or  other  mutual  hail,  cyclone,  or  fire  insurance  company, 
mutual  ditch  or  irrigation  company,  mutual  or  cooperative  telephone  company, 
or  like  organization  of  a  purely  local  character,  the  income  of  which  consists 
solely  of  assessments,  dues,  and  fees  collected  from  members  for  the  sole  purpose 
of  meeting  its  expenses ; 

Eleventh.  Farmers',  fruit  growers',  or  like  association,  organized  and  oper- 
ated as  a  sales  agent  for  the  purpose  of  marketing  the  products  of  its  members 
and  turning  back  to  them  the  proceeds  of  sales,  less  the  necessary  selling 
expenses,  on  the  basis  of  the  quantity  of  produce  furnished  by  them ; 

Twelfth.  Corporation  or  association  organized  for  the  exclusive  purpose  of 
holding  title  to  property,  collecting  income  therefrom,  and  turning  over  the  entire 
amount  thereof,  less  expenses,  to  an  organization  which  itself  is  exempt  from 
the  tax  imposed  by  this  title ;  or 

Thirteenth.  Federal  land  banks  and  national  farm-loan  associations  as  pro- 
vided in  section  twenty-six  of  the  act  approved  July  seventeenth,  nineteen  hun- 
dred and  sixteen,  entitled  "An  act  to  provide  capital  for  agricultural  develop- 
ment, to  create  standard  forms  of  investment  based  upon  farm  mortgage,  to 
equalize  rates  of  interest  upon  farm  loans,  to  furnish  a  market  for  United 
States  bonds,  to  create  Government  depositaries  and  financial  agents  for  the 
United  States,  and  for  other  purposes." 

Mutual  companies  exempt. 

(h)  Inasmiicli  as  the  basis  of  tax  is  the  fair  value  of  the  stock  of  a 
corporation,  mutual  insurance  companies  and  other  associations  not 
having  capitat  stock  represented  by  shares  will  also  be  exempt  from 
tax,  in  the  absence  of  a  basis  for  the  computation  of  the  tax. 

Returns. 

Tax  due  in  January  and  July,  1917,  and  annually  in  July  thereafter. 

Art.  3.  (a)  Section  3237,  Revised  Statutes,  as  amended  by  section  53 
of  the  act  of  October  1,  1890  (26  Stats.,  5GT),  provides  "that  all  spe- 
cial taxes  shall  become  due  on  the  1st  day  of  July,  1891,  and  on  the  1st 
day  of  July  in  each  year  thereafter,  or  on  commencing  any  trade  or 
business  on  which  such  tax  is  imposed.     In  the  former  case  the  tax 


shall  be  reckoned  for  one  year,  and  in  the  latter  case  it  shall  be 
reckoned  proportionately  from  the  1st  day  of  the  month  in  which  the 
liability  to  a  special  tax  commenced  to  the  1st  day  of  July  following." 
The  capital-stock  tax,  therefore,  which  becomes  effective  January  1, 
J  917,  will  be  payable  in  January,  1917,  on  returns  to  be  made  during 
that  month  for  the  six  months  ending  June  30,  1917.  In  July,  1917, 
and  annually  in  July  thereafter,  returns  must  again  be  made  and  the 
tax  paid  for  the  ensuing  fiscal  year. 

Returns   required  of  every   United   States   corporation   having  capital   stock   outstanding 

of   $75,000  or  over. 

(b)  Every  corporation,  joint-stock  company  or  association,  or  in- 
surance company,  organized  in  the  United  States  for  profit  and  hav- 
ing a  capital  stock  issued  and  outstanding,  represented  by  shares  of 
the  market  value  of  $75,000  or  over,  and  not  exempt  as  indicated  in 
article  2,  shall  make  a  return  on  Form  707  irrespective  of  the  par 
value  of  its  capital  stock,  unless  such  corporation,  joint-stock  com- 
pany or  association,  or  insurance  company  was  not  engaged  in  busi- 
ness during  the  preceding  taxable  year,  which  for  the  return  due 
January  1,  1917,  shall  be  the  fiscal  year  July  1,  1915,  to  June  30,  1916. 

Return  required  of  every  foreign  corporation. 

(c)  Every  corporation,  joint-stock  company  or  association,  or  in- 
surance company,  organized  for  profit  under  the  laws  of  any  foreign 
country  and  engaged  in  business  in  the  United  States,  shall  make 
return  on  Form  708  irrespective  of  the  amount  of  capital  employed 
either  at  home  or  in  this  country  in  the  transaction  of  its  business. 

Form  of  return  for  United  States  corporations. 

Substance  of  return  required  from  United   States  corporations. 

Art.  4.  The  return  required  by  article  3  of  corporations,  joint- 
stock  companies  or  associations,  or  insurance  companies,  organized 
in  the  United  States,  shall  be  made  on  Form  707,  to  be  supplied  by 
this  department,  and  shall  set  forth  the  following  particulars : 

(1)  Total  number  of  shares  of  stock  now  outstanding. 

(2)  Par  value  of  shares. 

(3)  Par  value  of  total  capital  stock  outstanding. 

(4)  Amount  of  surplus. 

(5)  Amount  of  undivided  profits. 

(6)  Case  I. — Average  market  value  per  share  during  preceding 
fiscal  year,  if  stock  is  listed  on  an  exchange. 

Case  'II. — If  stock  is  not  listed  on  an  exchange,  average  market 
value  per  share  computed  from  sales  made  during  preceding  fiscal 
year. 

Case  III. — If  stock  is  not  listed  on  any  exchange  and  no  sales  have 
been  made  during  preceding  fiscal  year,  or  if  sales  have  been  made 
and  the  price  is  unknown,  the  fair  average  value  of  the  stock  may  be 


estimated  from  the  following  data  set  forth  on  the  return :  Amount  of 
surplus,  amount  of  undivided  profits,  nature  of  business,  estimated 
earning  capacity,  average  dividends  per  share  paid  during  preceding 
five  years,  average  profits  per  share  earned  during  preceding  five 
years. 

(7)  Total  nuiiiber  of  shares  of  stock  outstanding  on  last  day  of 
fiscal  year. 

(8)  Fair  value  of  total  capital  stock  for  preceding  fiscal  year. 

(9)  Deduction  allowed  by  law  of  $99,000. 

(10)  Amount  of  fair  value  of  stock  over  $99,000  upon  which  tax 
should  be  computed. 

(11)  Tax  at  rate  of  50  cents  per  year  for  each  full  $1,000. 

(12)  Amount  of  munitions  tax,  if  any,  paid  under  Title  III  of 
this  act  since  making  the  last  previous  return. 

(13)  Amount  of  tax  due. 

Form  of  return  for  foreign  corporations. 

Substance  of  return  required  of  foreign  corporations. 

Art.  5.  The  return  required  by  article  3  of  foreign  corporations, 
joint-stock  companies  or  associations,  or  insurance  companies,  having 
capital  invested  in  the  transaction  of  its  business  in  the  United  States, 
shall  be  made  on  Form  Y08,  to  be  supplied  by  this  department,  and 
shall  set  forth  the  following  particulars: 

(1)  Amount  of  capital  invested  in  the  United  States. 

(2)  Amount  of  capital  invested  in  foreign  countries. 

(3)  Total  amount  of  capital  invested  in  the  corporation,  both  in 
the  United  States  and  elsewhere. 

(4)  Percentage  of  capital  invested  in  the  United  States. 

(5)  Percentage  of  $99,000  allowed  to  be  deducted  under  the  law. 

(6)  Amount  of  capital  upon  which  tax  should  be  computed. 

(7)  Tax  at  the  rate  of  50  cents  per  year  for  each  full  $1,000. 

(8)  Amount  of  munitions  tax,  if  any,  paid  under  Title  III  of 
this  act  since  making  the  last  previous  return. 

(9)  Amount  of  tax  due. 

Computation  of  tax. 

United   States   corporations. 

Art.  6.  Sec.  1.  Companies  or  associations  organised  in  the  United 
States  for  profit. — The  tax  on  companies  or  associations  having  a 
capital  stock  represented  by  shares  is  imposed  on  the  fair  average 
value  for  the  preceding  year  and  not  the  face  or  par  value  of  the 
capital  stock.  The  fair  value  of  the  capital  stock  shall  be  ascer- 
tained as  follows: 

stock  listed  on  exchange. 

(a)  Case  I. — If  the  stock  is  listed  on  any  exchange  its  fair  value 
wiU  be  determined  by  adding  the  quoted  highest  bid  price  for  the 


9 

stock  on  the  last  business  day  of  each  month  during  the  preceding 
fiscal  3'ear  (or  if  no  bid  price  was  quoted  on  the  last  day  then  the 
latest  day  in  the  month  on  AYhich  a  bid  was  quoted),  and  dividing 
by  12,  the  result  being  the  average  bid  price  per  share  for  tliat  year. 

stock  not  listed,  but  of  which  sales  have  been  made. 

(5)  Case  II. — If  the  stock  is  not  listed  on  any  exchange,  but  sales 
thereof  have  been  actually  made,  and  the  price  paid  for  the  stock  is 
known  to  the  officer  making  the  return,  or  can  be  discovered  by  him, 
the  average  price  at  which  sales  were  made  during  the  preceding  fiscal ' 
year  shall  be  the  determining  factor  in  ascertaining  the  fair  A'alue 
per  share. 

(In  the  foregoing  two  cases  the  actual  fair  value  of  the  stock  is 
ascertainable  from  the  facts  without  the  necessity  of  making  an 
estimate.) 

Cases  in  which  fair  average  value  of  stock  shall  be  estimated. 

(c)  Case  III. — If  Case  I  and  Case  II  can  not  be  applied,  viz,  the 
stock  is  not  listed  on  any  exchange,  and  no  actual  sales  have  been 
made  during  the  preceding  fiscal  year,  or  if  the  price  at  which  sales 
have  been  made  is  not  known  to  the  officer  making  the  return  the 
fair  average  value  of  the  capital  stock  shall  be  estimated,  and  the 
surplus  and  undivided  profits  for  the  preceding  fiscal  year  will  be 
taken  into  consideration  as  required  by  the  statute,  as  well  as  the 
nature  of  the  business,  its  earning  capacity  and  average  dividends 
paid,  or  profits  earned  during  the  preceding  five  years. 

Fair  value  of  total  capital  stock  outstanding. 

{d)  The  fair  value  per  share  ascertained  or  estimated  as  above 
multiplied  by  the  number  of  shares  outstanding  will  give  the  fair 
value  of  the  stock  for  taxation  purposes. 

Deduction  of  $99,000. 

(c)  From  this  total  will  be  deducted  the  sum  of  $99,000,  the  exemp- 
tion allowed  by  law,  and  the  tax  will  be  laid  upon  the  balance  at 
the  rate  of  50  cents  for  each  full  $1,000  of  the  remainder. 

Tax  due  January,  1917. 

(/)  Upon  the  returns  to  be  made  during  January,  191T,  for  the 
six  months  ending  June  30,  1917,  the  tax  due  will  be  25  cents  per 
$1,000  of  such  remainder. 

Deduction  of  munitions  tax. 

{g)  From  the  tax  due  as  so  determined  will  be  deducted  the 
amount  of  munitions  tax,  if  any,  actually  paid  since  making  the  last 
previous  return.  As  the  special  excise  tax  on  capital  stock  is  due  in 
January,  1917,  and  the  munitions  tax  will  not  be  determined  and 
assessed  until  March  or  April,  no  deductions  for  munitions  tax  will 
be  allowed  on  the  January,  1917,  return.  --  Deductions,  however,  will 


10 

be  allowed  on  the  July,  1917,  return  for  munitions  taxes  actually  paid 
prior  to  that  date. 

Sec.  2.  Corporations^  joint-stock  companies  or  associations^  or  in- 
surance companies.^  organized  for  prof-t  under  the  laws  of  any  for- 
eign country  and  engaged  in  business  in  the  United  States. 

Foreign  corporations. 

(a)  The  tax  imposed  on  such  companies  or  associations  shall  be 
computed  upon  the  actual  capital  invested  in  the  transaction  of  its 
business  in  the  United  States.  The  basis  of  taxation  is  the  average 
amount  of  capital  so  invested  during  the  preceding  fiscal  year. 

Deduction  of  proportion   of  $99,000   only  allowed  if  corporation-  makes  return   of   total 

capital  invested. 

(5)  The  exemption  from  the  amount  of  capital  invested  in  the 
United  States  equal  to  the  proportion  of  $99,000  as  the  amount  so 
invested  bears  to  the  total  amount  invested  in  the  transaction  of 
business  in  the  United  States  or  elsewhere  shall  only  be  allowed  a 
company  or  association  which  makes  return  to  the  Commissioner  of 
Internal  Kevenue,  under  these  regulations,  of  the  amount  of  capital 
invested  in  the  transaction  of  business  outside  of  the  United  States. 
Thus  a  foreign  company  or  association  investing  part  of  its  capital 
in  the  transaction  of  business  in  the  United  States  shall  be  liable  for 
tax  in  the  amount  of  50  cents  for  each  $1,000  of  the  actual  capital 
invested  in  the  United  States,  without  deduction  of  the  said  pro- 
portion of  $99,000,  unless  it  discloses  in  its  return  the  amount  of 
capital  invested  in  the  transaction  of  business  outside  of  the  United 
States. 

Corporations  not  in  business  during  preceding  taxable  year. 

Sec.  3.  Corporations  not  engaged  in  business  duHng  preceding  tax- 
able year. — This  tax  shall  not  be  imposed  upon  any  corporation, 
joint-stock  company  or  association,  or  insurance  company  not  en- 
gaged in  business  during  the  preceding  taxable  year,  or  in  the  case 
of  the  taxable  period  ending  June  30,  1917,  not  so  engaged  during 
the  year  July  1,  1915,  to  June  30,  1916.  The  tax  shall  be  computed 
upon  each  full  value  of  $1,000  and  not  on  any  fractional  part  thereof. 

Collection  of  tax. 

Special  list,  Form  23c. 

Art.  7.  On  account  of  the  impracticability  of  issuing  stamps  in 
the  various  amounts,  this  tax  will  be  collected  by  assessment  on  a 
special  list  for  the  months  of  January  and  July,  1917,  and  annually 
thereafter  in  July.  Any  delinquent  returns  made  in  February  or 
other  months,  or  any  assessments  for  delinquency  in  taxes,  may  be 
listed  on  the  regular  list  Form  23,  and  collected  in  the  usual  way. 


11 

Returns   retained   by   collector. 

(a)  Returns  listed  on  special  lists  will  be  retained  in  the  office  of 
the  collector  as  the  special  list  Tvill  be  prepared  so  as  to  give  the 
essential  data  shown  by  the  return. 

Returns  forwarded  to  commissioner. 

(h)  Returns  listed  on  regular  lists  will  be  forwarded  to  this  office 
with  the  list  for  audit. 

Penalty  of  5  per  cent. 

(c)  Upon  failure  to  pay  the  tax  assessed  within  10  days  after 
notice  and  demand,  a  penalty  of  5  per  cent  of  the  tax  unpaid  and 
interest  at  the  rate  of  1  per  cent  per  month  until  paid  shall  be  added 
to  the  amount  of  such  tax. 

Penalties. 

Administrative  and  assessment  laws  applicable  to  this  law. 

Art.  8.  (a)  Under  section  409  it  is  provided  that  "  all  adminis- 
trative or  special  provisions  of  law,  including  the  law  relating  to 
the  assessment  of  taxes  so  far  as  applicable,  are  hereby  extended  to 
and  made  a  part  of  Title  IV,  and  every  person,  firm,  company,  cor- 
poration, or  association  liable  to  any  tax  imposed  by  this  title  shall 
keep  such  records  and  render  under  oath  such  statements  and  returns 
as  shall  comply  with  such  regulations  as  the  Commissioner  of  In- 
ternal Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury, 
may  from  time  to  time  prescribe." 

Penalties  for  failure  to  make  return. 

(h)  Any  company  or  association,  therefore,  subject  to  special  tax 
under  section  407  of  this  act,  which  fails  to  make  returns  during  the 
months  of  Januarj^,  1917,  and  'Tuly,  1917,  and  annually  in  July 
thereafter,  will  be  liable  to  the  penalties  imposed  by  section  3176, 
Revised  Statutes,  as  amended  by  section  16,  act  of  September  8, 1916, 
which  reads  as  follows : 

Collector  may  make  the  return. 
If  any  person,  corporation,  company,  or  association  fails  to  make  and  file  a 
return  or  li.^t  at  the  time  prescribed  by  law,  or  makes,  willfully  or  otherwise,  a , 
false  or  fraudulent  return  or  list,  the  collector  or  deputy  collector  shall  make 
the  return  or  list  from  his  own  knowledge  and  from  such  information  as  he 
can  obtain  through  testimony  or  otherwise.  Any  return  or  list  so  made  and 
subscribed  by  a  collector  or  deputy  collector  shall  be  prima  facie  good  and  suffi- 
cient for  all  legal  purposes. 

Extension  of  30  days. 
If  the  failure  to  file  a  return  or  list  is  due  to  sickness  or  absence  the  collector 
may  allow  such  further  time,  not  exceeding  tliirty  days,  for  making  and  filing 
the  return  or  list  as  he  deems  proper. 

Fifty  per  cent  penalty. 
The  Commissioner  of  Internal  Revenue  shall  assess  all  taxes,  other  than  stamp 
taxes,  as  to  which  returns  or  lists  are  so  made  by  a  collector  or  deputy  collector. 
In  case  of  any  failure  to  make  and  file  a  return  or  list  within  the  time  prescribed 


12 

by  law  or  by  the  collector,  the  Commissioner  of  Internal  Revenue  shall  add  to 
the  tax  fifty  per  centum  of  its  amount  except  that,  when  a  return  is  voluntarily 
and  without  notice  from  the  collector  filed  after  such  time  and  it  is  shown  that 
the  failure  to  file  it  was  due  to  a  reasonable  cause  and  not  to  willful  neglect,  no 
such  addition  shall  be  made  to  the  tax.  In  case  a  false  or  fraudulent  return 
or  list  is  willfully  made,  the  Conmiissioner  of  Internal  Revenue  shall  add  to  the 
tax  one  hundi-ed  per  centum  of  its  amount. 

The  amount  so  added  to  any  tax  shall  be  collected  at  the  same  time  and  in 
the  same  manner  and  as  part  of  the  tax  unless  the  tax  has  been  paid  before  the 
discovery  of  the  neglect,  falsity,  or  fraud,  in  which  case  the  amount  so  added 
shall  be  collected  in  the  same  manner  as  the  tax. 

(c)  In  addition  to  the  penalties  imposed  by  section  8176,  Revised 
Statutes,  section  408  provides  as  follows: 

Specific  penalty. 
Everj'  person  who  carries  on  any  business  or  occupatio'i  for  which  special 
taxes  are  imposed  by  this  title,  without  having  paid  the  special  tax  therein 
provided,  shall,  besides  being  liable  to  the  payment  of  such  special  tax,  be 
deemed  guilty  of  a  misdemeanor,  and  upon  conviction  thereof  shall  pay  a  fine 
of  not  more  than  $oOO,  or  he  imprisoned  not  more  tlian  six  months,  or  both,  in 
the  discretion  of  the  court. 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Approved : 

W3I.  P.  Malburn, 

Acting  /Secretary  of  the  Treasury. 

o 


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UNIVERSITY  OF  OALIT^RNIA 

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GAYIAMOUNT 

PAMPHLET  BINDER 


Manufactured  bv 
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